Australia's Labour Force Survey for August is scheduled to be released by the ABS today at 11:30am (AEST). The spread of the Delta variant and associated lockdowns have hit the Australian economy hard, severely disrupting the momentum in the labour market. In today's report, employment is expected to show its largest monthly decline since last year's national lockdown, while the unemployment rate is likely to rise for the first time in nearly a year.
As it stands | Labour Force Survey
Employment slowed sharply to a 2.2k rise in July weighed by New South Wales (-36.4k) as Sydney went into lockdown, though there were offsetting gains in the other states. However, the headline result was materially better than the market consensus for a 43.1k fall. This brought total employment to 13.156 million to be 1.2% above its pre-COVID level (full review here).
After a very strong June quarter in which the average monthly gain in full-time employment was 61k, the segment recorded a 4.2k decline in July. Part-time employment lifted by 6.4k for the month, though it had fallen by 22.5k in June and has been weak in 2021. As of July, full-time employment was 1.7% above its pre-pandemic level compared to growth of 0.3% in the part-time segment.
Australia's participation rate fell from 66.2% to 66% reflecting a material contraction in New South Wales (65.9% to 64.9%) as the Sydney lockdown saw many people exit the labour force. The weakness in participation drove a decline in the measured unemployment rate from 4.9% to 4.6% — its lowest since 2008. However, both underemployment (8.3% from 7.9%) and underutilisation (13% from 12.8%) increased reflecting the disruptions from lockdown.
After falling heavily in June (-1.8%) with Victoria in lockdown, hours worked nationally were broadly flat (-0.2%) in July. Hours worked in New South Wales plunged by 7% but that was largely offset by the reopening in Victoria (9.7%) and rises in other states. While full-time hours held up in August (0.2%), part-time hours fell materially again in response to lockdowns; -2%m/m after a 3%m/m decline in July.
Market expectations | Labour Force Survey
In August, the disruptions associated with Delta intensified, sending around 60% of the Australian population across Sydney, Melbourne and Brisbane into lockdown either throughout or for part of the survey reference period. The lockdown in the ACT was announced in the final few days of the period.
The median estimate is for an 80k fall in employment in August around a significant spread of estimates from -300k to -50k. High-frequency ABS payrolls data shows the sharp deterioration in employment that occurred between mid July and mid August, with the index falling by 2.4% over the period.
State payrolls show employment in New South Wales will fall heavily as the Sydney lockdown lengthened and tightened. Victoria's return to lockdown is likely to see it hand back the gain from last month. Though the lockdown in parts of the state was shorter than elsewhere, weakness in employment in Queensland can also be expected.
The unemployment rate has been falling since November but that run looks to have come to an end in August, with the market expecting a rise from 4.6% to 5.0%. The wide range of estimates for the outcome — from 4.8% to 5.5% — reflects uncertainty over the classification of workers stood down due to lockdowns and the size of the impact on the participation rate. The current design of fiscal support payments (paid directly by the government rather than going through firms' payrolls as in JobKeeper) could mean that many workers are classified as unemployed but will resume work when lockdowns end.
What to watch | Labour Force Survey
The hit to employment and the rise in the unemployment rate will take most of the headlines, but as has been the case throughout the pandemic the change in hours worked will give the clearest indication of the lockdown impacts on the economy. The participation rate is also a pivotal number to watch, not only for its influence on today's report but also in informing estimates of the extent of spare capacity that has accumulated from the Delta disruption.